Orders Brisk In August

Business remained brisk for many yarn spinners through the first part of August, continuing a
positive trend that began back in June and further fueling the hope that the market has, at last,
stabilized.

"Ring-spun is very brisk and has been for a while now," said one spinner. "We began seeing
an increase in orders a couple of months ago and it's been steady ever since."

Added another spinner, "Our business has been very positive, particularly with ring-spun
yarns. Our business is primarily associated with Central America, and we saw business improve
drastically back in June. Fortunately, it's held up pretty well."

While the current run of increased orders is not the first for 2012, several factors
separate it from the previous upticks that occurred near the beginning of the year and in April.
"Already, what we've seen so far is more sustained than those previous spikes," said one spinner.
"There seems to be less fear over the volatility of raw material prices. Customers are not as
concerned that they are going to be on the hook for yarn that is priced well above the market
value. For a long time, customers shied away from longer programs because they were unsure of what
the market would be."

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Cotton Prices Stabilizing? Another spinner said, "I think when customers see current cotton prices, they breathe a sigh
of relief. Over the past few months, prices have returned to what they were before the whirlwind in
late 2010. They are looking at raw material prices and seeing something they are familiar with. So,
there is less hesitancy to place larger orders."

That spinner's observation is backed up by statistics from the U.S. Department of
Agriculture (USDA). For the week ended Aug. 17, 2012, quotations for the base quality of cotton in
the seven designated markets measured by the USDA averaged 67.98 cents per pound. For the 2009-10
season - the last before the market became so volatile - prices for the year averaged 67.76 cents
per pound. In contrast, prices for the 2010-11 season averaged 137.88 cents per pound, with a high
on March 7, 2011, of 209.60 cents.

"The return of prices to their pre-2011 levels is, I think, a very positive sign for
business, especially if prices level out and don't fall a whole lot more," said one industry
observer. "I've said for a long time that what the industry needs is a sustained period of good
business, not necessarily great business. What hurts are those periods of very robust business that
stretch the ability of the industry to deliver, which are then followed by periods of very slow
business that leave companies struggling to cover costs."

Synthetics And Blends Remain Strong Continuing a trend that began when cotton prices began increasing dramatically several years
ago, a number of customers are continuing to replace cotton yarns with blends and synthetics. "In
our business, we saw a shift to blends a couple of years ago. A lot of customers who were making
100-percent cotton products shifted to blends. We figured that when cotton prices came back down,
these customers would move back to 100-percent cotton. But in a lot of instances, this just hasn't
happened. I believe it's because they think that, long-term, synthetic prices will be more stable
than cotton, although, in reality, that is not always the case."

Spinners are optimistic that the current spate of orders will continue through most of the
year. "To be honest, we are looking at it through a positive lens at the moment. We expect business
to continue to be strong for most of the rest of the year. We expect a little bit of a slowdown
around the holidays and then for 2013 to begin in a very strong fashion."